Lula plans airline bailout to make flying cheaper for Brazilians

Brazil is putting the finishing touches on a rescue plan for its troubled airlines, as President Luiz Inacio Lula da Silva’s government confronts a challenge the US and Europe dealt with much sooner after the pandemic. The package, to be announced in coming days, will use public funds as collateral for loans to struggling carriers from the country’s development bank, according to a person familiar with the matter. But the plan is still in flux and it’s expected to be more of a band-aid solution than an industry cure-all. Cutting fares enough to allow the poor to fly regularly has become somewhat of an obsession for Lula, who campaigned on a pledge to restore prosperity in Latin America’s largest economy. The high cost of jet fuel in Brazil is a complicating factor, with the state-run oil company under pressure to overhaul its pricing formula. Inaction by Lula’s predecessor after Covid-19 pushed domestic carriers to the brink. The new administration has been struggling to agree on a way forward, and when Gol Linhas Aereas Inteligentes SA filed for bankruptcy protection at the end of January the issue vaulted to the top the agenda. Azul SA is now exploring a potential takeover bid for its troubled competitor. The exact amount of aid is still being determined. Some within government are pushing for as much as 8b reais ($1.6b), while the Finance Ministry prefers an amount closer to 5b reais, according to two people familiar, who spoke on condition of anonymity because the discussions are private. “Airline companies didn’t receive government help during the pandemic and at some point you have to pay the price,” Ygor Araujo, an analyst at Genial Investimentos, said in an interview. By his estimation, a bailout of the size under consideration could relieve cash-flow pressures for six to eight months but wouldn’t be sufficient to lower fares on its own.<br/>